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New Estimates of Economies of Scale and Scope in Higher Education

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  • David N. Laband
  • Bernard F. Lentz

Abstract

Following Colin, Rhine, and Santos (1989), we reeslimate cost functions for 1492 private and 1450 public institutions of higher education (IHEs) in the United States, using data for fiscal year 1995‐1996. Costs are modeled as a function of the level of production of three outputs: undergraduate education, graduate education, and externally funded research. We find that public and private IHEs are characterized by significantly different cost functions. At the sample means of the variables, we estimate that public and private IHEs enjoy both ray economics of scale and product‐specific economies with respect to production of all three outputs. However, we also find that, at the sample means, both public and private institutions are characterized by diseconomies of scope in the production of these three outputs. Our findings suggest that both public and private IHEs could reduce their unit costs of operation by growing relative to the current mean levels of production.

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  • David N. Laband & Bernard F. Lentz, 2003. "New Estimates of Economies of Scale and Scope in Higher Education," Southern Economic Journal, John Wiley & Sons, vol. 70(1), pages 172-183, July.
    • Handle: RePEc:wly:soecon:v:70:y:2003:i:1:p:172-183
    DOI: 10.1002/j.2325-8012.2003.tb00562.x
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    1. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    2. Gordon C. Winston, 1999. "Subsidies, Hierarchy and Peers: The Awkward Economics of Higher Education," Journal of Economic Perspectives, American Economic Association, vol. 13(1), pages 13-36, Winter.
    3. Cohn, Elchanan & Rhine, Sherrie L W & Santos, Maria C, 1989. "Institutions of Higher Education as Multi-product Firms: Economies of Scale and Scope," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 284-290, May.
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    Cited by:

    1. Jože P. Damijan & Sandra Damijan & Osiris Jorge Parcero, 2023. "Is There a Size Premium for Nations?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(4), pages 3974-4016, December.
    2. repec:bcp:journl:v:3:y:2019:i:11:p:323-327 is not listed on IDEAS
    3. Isaac Addai, 2019. "Assessing University of Education, Winneba Production Economies of Scale and Scope: A Further Decomposition," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 3(11), pages 323-327, November.

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